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Booz & Company Consultant Interview Question

I interviewed in New York, NY and was asked:
"A new cancer drug has been developed. How will you price it?"
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Part of a Consultant Interview Review - one of 113 Booz & Company Interview Reviews

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t’s an open question, but it’s better to have $300,000 drugs that are highly effective than $3,000 drugs that aren’t . Medicines are priced as they are because the Payors will pay. In US the customer is not the patient but the insurance company or government is picking up the check. As a result drug companies can price new medicines at a cost that no individual person could pay. I can count ten medicines that have an average cost of more than $200,000 per patient per year, including the treatments made by Sanofi’s Genzyme unit, Biomarin, Alexion Pharmaceuticals, and now Vertex’s new cystic fibrosis drug, Kalydeco.
- Euglintine Khan on Aug 7, 2012
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In general, there are three pricing models: 1) cost base, consider how much it cost to produce the drug and factor in R&D cost and payback, ROI goals. 2) Price base. Consider how much similar products are being charged, as well as prices for substitutes. 3) Value base. Consider the benefits customer can get, and interpret it into $$. With these three models, we will get a pricing range. Now consider the target customer, as well as the company's goal, which in most case would be profit maximization. Select a price point within the range that can be justified. However, always leave it open as "We will adjust price depends on market reaction".
- William Wong on Sep 25, 2012

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